Slater and Gordon tells shareholders to accept huge share dilution

Slater and Gordon has told its shareholders that the value of their shares will be severely diminished under its proposed recapitalisation plan.

The plan has become a necessity after the Australian firm fell into serious trouble in the UK after buying Quindell’s legal services division and swathes of industrial deafness claims that turned out to be hugely inflated in price.

The firm has told creditors and shareholders that the only alternative to the plan is insolvency. The plan will see 12 senior lenders end up with 95% of equity within the troubled firm and would see its recently separated UK arm dump a large chunk of its debt.

John Skippen, Slater and Gordon’s chairman, said that the board was deeply sorry for the loss of value for shareholders, who will also not longer have any equity in the firm’s former UK arm, which will be completely owned by senior lenders.

Under the plan, the UK arm currently owed by shareholders would be transformed from a £380 million holding into £15 million plus £250 million of convertible notes which would only become repayable if certain matters are resolved in Slater and Gordon’s favour. These include the firm’s decision to sue Watchstone Group for fraudulent misrepresentation in the sale of its legal arm to Slater and Gordon when it traded as Quindell.

In its annual report, Slater and Gordon said that it had closed 18 office in the UK in the year ending 30 June. However it said that the firm had continued to operate without disruption. 60% of the firm’s UK business was in personal injury work.

In his introduction to the firm’s annual report, Skippen explained that the recapitalisation, if approved by shareholders, would permanently reduce Slater and Gordon’s debt to a sustainable level. He also said that it provided the “best opportunity to secure the future of the firm, its clients and employees”.

“While the past two years have no doubt been one of the most difficult periods in the firm’s history, what remains in place is the commitment of our people to serving the needs of our clients,” wrote Skippen.

“I would like to thank all staff in both the UK and Australia for their dedication and their hard work and sincerely wish them and the firm every success. This will be my last report as Chair of Slater and Gordon and it has been a privilege to serve in this capacity.”

Mark Dugdale